Chris Lombardi puts defense and security under the spotlight, as he shares his takes on recent NATO and EU cooperation and provides insight into the company’s own long-term strategic partnerships in Europe.

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1 December Ecofin

A LANDMARK accord aimed at preventing unfair tax competition between EU countries was agreed on the basis of a package deal designed to give something to everyone. The commitment to a voluntary code of tax conduct was accompanied by a promise to consider a new Union withholding tax on savings and laws making it easier for companies to transfer interest and royalty payments across borders. The deal, which will be formally approved by next week’s Luxembourg summit, marks the first time ministers have made progress in the sensitive area of direct taxation.

European Voice

12/10/97, 5:00 PM CET

Updated 4/12/14, 2:43 AM CET

THE code of conduct will force governments to freeze their current corporate tax rules at the start of 1998 before beginning to tackle damaging tax regimes over the next five years. Countries will also have to consult before bringing in new corporate tax legislation. A committee of national tax experts will be set up by the start of 1999 to rule on what measures are damaging.

EVEN before the meeting ended, however, there were ominous signs that implementation of the accord could be stormy. Luxembourg warned that it would not accept a minimum withholding tax unless it was balanced by a minimum rate for corporate tax. France said it wanted a withholding tax at 25% or above, a level that is likely to be well above that accepted by Luxembourg. But the question of whether the tax code would apply to Europe’s many tax havens became slightly clearer. Spain won a special exemption from the code for the Canary Islands and the UK’s Channel Islands and the Netherlands’ Antilles also appeared to be excluded.

MINISTERS talked late into the evening but failed to reach agreement on the Franco-German proposal for an informal policy forum for countries taking part in the single currency, the so-called Euro-X. Countries which have ruled themselves out of the single currency first wave – the UK, Sweden and Denmark – are deeply suspicious of what they regard as an inner club of European countries and did not hesitate to voice their misgivings.

LUXEMBOURG Premier and Finance Minister Jean-Claude Juncker, who chaired the meeting, displayed some irritation over the failure to get agreement. If no agreement on a channel of communication between the single currency ‘ins’ and ‘outs’ can be found, then the euro countries could go it alone with their own forum. But Juncker said he was still looking for support for some kind of arrangement from all 15 EU members. The issue is now likely to go to next week’s summit of Union leaders in Luxembourg.

JUNCKER said an early decision on the question of who should be the president of the European Central Bank (ECB) was necessary, but declined to comment further. At the moment, there are only two official candidates for the job: Dutchman and current European Monetary Institute president Wim Duisenberg and Bank of France governor Jean-Claude Trichet.